On a flight out to the Middle East I was puzzled as to why I being asked to show my boarding card in WH Smiths at Stansted. There were large queues behind me, my paperwork was in my pocket and my hands were full, the last thing I wanted to do was to rummage around looking for my boarding card. Of course we all know the reason why we’re being asked for our boarding cards at airport shops. Greed!

Goods sold to those travelling outside of the EU are VAT, the standard rate of which is 20% (it varies depending on product). But rather than pass on the saving, many companies are pocketing the extra cash for themselves. Anger has being brewing over this for a while now, and in a bid to encourage retailers to pass on the discount to their customers, passengers travelling outside of the EU should refuse to show their boarding pass, or at the very least negotiate a discount for doing so.

Why now

The issue hit the media when the Independent newspaper investigation revealed that many airport retailers were asking travellers to show their boarding pass for VAT relief, but weren’t passing on the savings to customers. Highstreet names such as Boots and WH Smith were amongst those named and shamed in the report.

What does the Government say

David Gauke, Financial Secretary to the Treasury says:

“The VAT relief at airports is intended to reduce prices for travellers not as a windfall gain for shops.”

Note, there is no legal or security requirement to show your boarding card when purchasing goods at the airport. Any store that claims otherwise is lying. It is merely used for VAT relief.

What do retailers say

The stores themselves are quick to point out that retail space at airports can be more costly than on the highstreet, and so they need higher margins to make those stores viable. They also say that the dual pricing i.e displaying and charging a separate price for different customers is costly and confusing. Though critics call this a nonsense and say that stores could implement dual pricing very quickly if it was in their interests.

Airport Pricing models

There seems to be three distinct tiers when it comes to airport retailers pricing models. Firstly there are those that sell goods at the same price to everyone, most often at a price similar or higher than charged in their highstreet stores. WH Smith for example. These are companies that are creaming the most profit on all non-EU destination customers. Next, there are those retailers like Dixons that sell at a price lower than their highstreet stores but higher than the VAT-free price. These are using a blended price model, using non-EU travelling customers to subsidise lower prices for EU travellers. Finally, there are upmarket stores like Harrods, usually only found in International hubs. Due to the high margins on luxury products, such stores are able to sell at a VAT-free equivalent price to everyone, knowing that they’ll sell enough to non-EU destination travellers to justify absorbing the loss on EU travellers.

So should I show my boarding pass?

Moneysaving Answers backs the recommendation not to show your boarding card, especially for small items from the likes of Boots and WH Smiths. It might however be worthwhile showing it when purchasing big-ticket items if the price is right and/or you can negotiate a worthwhile discount.

Also note that you DO need to show your boarding card when buying duty free products. You're getting these free of duty/tax and so must prove you're eligible for that purchase.